LME chairman Sir Brian Bender defends China deal

The chairman of the London Metal Exchange (LME) has dismissed suggestions the
commodities market will be open to manipulation by China as a result of its
recent sale.

But in an interview with The Sunday Telegraph – the first since the deal was announced – Sir Brian rejected such suggestions. The former career civil servant pointed to the safeguards in place as part of the deal which remains subject to approval by the Financial Services Authority (FSA) saying that the presence of a board with a majority of independent non-executive directors would be a safeguard.

Defending the LME's pending £1.39bn purchase by Hong Kong Exchanges & Clearing (HKEx), Sir Brian Bender said that he did not believe the new owner would take advantage of its position.

In the year-long bid process for the LME, which ended last month, critics suggested China's role as consumer of 40pc of global industrial metal output meant it could take advantage if it were to gain control of the London bourse.

But in an interview with The Sunday Telegraph – the first since the deal was announced – Sir Brian rejected such suggestions.

The former career civil servant pointed to the safeguards in place as part of the deal which remains subject to approval by the Financial Services Authority (FSA) saying that the presence of a board with a majority of independent non-executive directors would be a safeguard.

"I would also say that were there to be any attempt to manipulate price, there's no magic reason why the liquidity is with the LME," he said.

"It's with the LME because it's a trusted reference price. If it ceased to be trusted, why wouldn't the metal traders go somewhere else? In which case, the buyer would have wasted a lot of money on something that wasn't worth a lot."

He also defended the new owner's plans for the LME, including its commitment to retain the trading "ring" – the last open site in London – until January 2015. "If the ring is continuing to thrive, and providing a valid place for the price discovery process, then it will continue," he said.

The decision followed a near year-long process, led by boutique investment bank Moelis, during which there were as many as 15 indications of interest. Those indications were then whittled down to a final two by late April – HKEx and InterContinental Exchange (ICE) of the US.

While HKEx's bid focused on the ability to expand the LME into China and other parts of Asia, ICE focused on clearing synergies and the strength of its technology. Both exchange's final bidders are understood to have been very close in financial terms.

The LME chairman – who may yet leave the exchange as part of the transaction – also defended the £10m payment the LME's chief executive, Martin Abbott, is to receive as a result of the sale.

Sir Brian praised Mr Abbott's foresight in upgrading the LME's information technology and starting work on clearing of settlements, which attracted ICE which initially approached the LME in the summer of 2011.

The FSA will begin to vet the sale to HKEx once the Asian exchange formally files the necessary documentation, expected in the next few weeks.